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Summary of Oversight and Regulatory Activities

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Summary of Oversight and Regulatory Activities Summary of Oversight and Regulatory Activities September 2018 DIRECTION PRINCIPALE DU FINANCEMENT DES SOCIÉTÉS THE DIRECTION PRINCIPALE DU FINANCEMENT DES SOCIÉTÉS (“CORPORATE FINANCE”) IS RESPONSIBLE FOR ENSURING THAT INVESTORS ARE PROTECTED AND MARKETS OPERATE EFFICIENTLY. Profile 2 OVERSIGHT of compliance DEVELOPMENT and Fostering with continuous disclosure, IMPLEMENTATION of guidance 7 securities distribution, and regulations related to securities awareness take-over bid, and insider distributions, mergers and acquisitions, reporting requirements. and ongoing requirements for reporting Informing 18 issuers in Québec (the “companies”) and insiders. Innovating 40 Message from the Senior Director, Corporate Finance The 2017–2020 Strategic Plan of the Autorité des marchés financiers (the “AMF” or the “Authority”) sets out orientations demonstrating our leadership, the value we add, and our capacity for innovation within the scope of our mission as Québec’s financial sector regulator. I am therefore proud to provide you with an overview of Corporate Finance’s principal accomplishments for the year 2017-2018. The section FOSTERING AWARENESS presents a sampling of the main deficiencies identified this past year in MD&As, mining technical reports, insider reports, and prospectuses and related offering documents. I encourage you to read this section carefully as we may ask for corrections or delay the issuance of a prospectus receipt if we consider disclosure to be incomplete or incorrect. The section INFORMING contains some interesting information, including a list of the issue-oriented reviews in progress and those planned for 2018-2019, the report on our first year overseeing enterprises subject to An Act respecting transparency measures in the mining, oil and gas industries, and a new item devoted to our regulatory work in socially responsible investing. 1 We were also very active with respect to financial technology (“fintech”) businesses. The AMF is co-lead of the Canadian Securities Administrators (“CSA”) Regulatory Sandbox, established in 2017. During 2017-2018, this committee 2 considered approximately twenty applications, most of them from companies wishing to raise start-up capital by issuing cryptocurrencies or tokens. The work currently underway will enable us to develop our expertise and understanding of the 3 issues and technologies behind these new business models. The regulatory part of the section INFORMING discusses a major focus of our regulatory activities last year: the drafting of proposed National Instrument 52-112 – Non-GAAP and Other Financial Measures Disclosure. The AMF is co-lead on this 1 initiative, reflecting the importance we place on the quality and consistency of financial information available in the markets. 2 The public consultation on reducing the regulatory burden, announced in our 2016-2017 summary, resulted in the creation of six regulatory projects. The AMF will be lead or co-lead on five of them. The purpose of all these projects is to facilitate access 3 to public markets, which provide companies with transparency and visibility. We are therefore exploring avenues more in line with the new realities imposed by the speed at which financial information is transmitted and absorbed on the world’s stock 4 markets, changing investor communication habits, and the heightened presence of private sources of financing. 5 Lastly, we changed the composition of the Corporate Finance Advisory Committee to include institutional investor, reporting issuer and brokerage firm representatives, as well as securities lawyers. In addition to this committee, the AMF also has a Financial Advisory Committee and a Mining Advisory Committee. These key forums for discussion and exchange are important to us, and I sincerely thank the members of all of them for their contribution: because of your invaluable input, we are better able to carry out our role as a local regulator. 1 2 Lucie J. Roy 3 Senior Director, Corporate Finance 4 5 6 7 8 1 2 3 NOTE : For the sake of concision, the full names of the regulations (including the forms), policy statements and notices are listed in Appendix A. Autorité des marchés financiers 1 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES Table of Contents We begin with a PROFILE of companies and securities trading in Québec and then, under the themes FOSTERING AWARENESS, INFORMING and INNOVATING, discuss securities regulatory issues pertaining to companies and insiders. PROFILE 2 1 Companies 2 2 Overview of distributions by Québec companies 3 3 Findings of continuous disclosure reviews 6 FOSTERING AWARENESS 7 1 Management’s discussion and analysis 8 2 Certification of disclosure in issuers’ annual and interim filings 10 3 Insider reports 12 4 Disclosure for mineral projects 13 5 Certain requirements for distributions 15 INFORMING 18 1 AMF issue-oriented reviews 18 2 An Act respecting transparency measures in the mining, oil and gas industries: Initial report 20 3 Growing interest in socially responsible investing 22 4 Booming industry sectors 25 5 More reminders 27 6 Recapitalization of federally chartered banks (bail-in) and ramifications for Québec 30 7 Regulatory initiatives 31 8 The AMF on the international stage 37 INNOVATING 40 1 Artificial intelligence initiatives for disclosure monitoring 40 2 Fintechs – The work of the regulatory sandbox 41 3 Monitoring via social media 42 APPENDIX A 43 Legal deposit – Bibliothèque et Archives nationales du Québec, 2018 ISSN 2561-200X (On-line) This document is published on the website of the Autorité des marchés financiers at: https://lautorite.qc.ca/en/general-public/. Autorité des marchés financiers 2 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES PROFILE We encourage you to read this section, which provides a snapshot of companies and securities trading in Québec. 1 Companies Some figures 2,026 companies – reporting issuers in Québec 2 034 sociétés – émetteurs assujettis au Québec 1 724 companies for which the AMF is the principal regulator 7511 sociétés dont le Québec est l’autorité principale 58%59 % : émetteursventure émergentsissuers 42% 41 % : autres: other émetteurs issuers 1 Including 183 companies subject to a cease trade order and 257 Desjardins caisses (credit unions). Autorité des marchés financiers 3 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES Overview of distributions 2 by Québec companies2 Québec companies draw on a variety of financing sources to fund their operations. This section presents the amounts raised by Québec companies on the public market and exempt market. Profile of Québec companies listed on the Toronto Stock Exchange and the TSX Venture Exchange The following graph shows the changes in the market capitalization of Québec companies listed either on the Toronto Stock Exchange (“TSX”) or the TSX Venture Exchange (“TSXV”).3 It also shows the changes from 2008 to 2017 in such market capitalization as a percentage of the total capitalization of all Canadian companies. In 2016, market capitalization was $390 billion and represented 16% of Canadian market capitalization. In 2017, as in 2016, the market capitalization of Québec companies increased to $438 billion, but still accounted for 16% of the total market capitalization of companies in Canada. Moreover, this percentage continued to be smaller than Québec’s share of Canada’s gross domestic product (“GDP”) in 2017, which stood at 19%.4 Market Capitalization of Québec Companies (in billions of dollars) 500 500 25% 450 400 20% 350 300 300 15% 250 200 10% 150 100 100 5% 50 0 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 TSX and TSXV As a percentage of the Canadian total Sources: TMX Group and the AMF Sources: TMX Group and the AMF 2 Companies that have their head office in Québec. 3 The market capitalization of companies listed on other stock exchanges is not included. 4 Source: Statistics Canada. Autorité des marchés financiers 4 SUMMARY OF OVERSIGHT AND REGULATORY ACTIVITIES 2 Overview of distributions by Québec companies (continued) When the Morningstar National Bank Québec Index is Companies began to seek financing again on the stock compared with the S&P/TSX Composite Index, Québec markets. Globally, 2017 saw more initial public offerings companies outperformed Canadian companies as a (“IPOs”) than the past ten years. In 2017, there were 28 IPOs whole over the past few years. Like the Québec economy, in Canada on the TSX and TSXV, for a total of $6.1 billion— the sectoral distribution of Québec companies is more a significant improvement over 2016. 5 However, the trend diversified that than for Canadian companies as a whole. reversal did not happen in Québec. In 2017, for a second The Québec index’s improved performance in recent consecutive year, there were no Québec IPOs on the TSX years is partly explained by the small number of energy or TSXV. companies in the index. As shown in the graph below, the number of Québec The strong global trend that had been emerging over companies listed on the TSX and TSXV decreased slightly the previous several years of fewer and fewer businesses over the past year, from 195 to 189, in keeping with the turning to the stock markets for their capital needs downward trend of the past ten years. appeared to reverse direction in 2017. Number of Québec companies by industry sector 335500 225500 151500 5500 22000808 22000909 22001010 22001111 22001212 22001313 22001414 22001515 22001616 22001717 CommunicationsCommunications and and media media DiversifiedDiversified industries industries LifeLife sciences sciences MiningMining TechnologyTechnology OtherOther Sources:Sources: TMX TMX Group Group and and the the AMF AMF Distributions by Québec companies on the public market and exempt market In 2017, Québec companies raised $3.0 billion on the public In 2017, 376 prospectuses were filed in Canada, markets. This represents a slight decrease from $3.2 billion, including 161 in all Canadian provinces (43%) and 104 in all which was both the amount raised in 2016 and the average Canadian provinces excluding Québec (28%). The other for the last three years. 111 prospectuses were filed in only a few Canadian provinces (29%), including, in some cases, Québec.
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